May 2009

Supply Side

Prepare for the recovery

By J. Baird

The current lull is an opportunity for mining companies to do some serious thinking and smart positioning

The mining industry is a cyclical thing and we are now entering a low period that may last for some time. Mining suppliers need strategies, not only to get them through the difficult time, but also to prepare them for the recovery. Here are some things that you may wish to think about.

First of all, the downturn will not eliminate the current skilled labour shortages in the industry. The Mining Industry Human Resources Council projects an annual labour demand of 4,600 people until 2016, even under conditions of industry contraction. Based on retirement alone, the mining industry will continue to experience pressures in attracting, recruiting and retaining skilled workers through 2009. Each job that you save today is one that you won’t have to pay to fill later. Do everything you can to be a good employer and retain staff.

Despite the current negative commodities, financial and economic situations, there is every reason to stay positive. Based on the five cycles over the last 50 years, there will be another expansion in mineral exploration, development and production. Convey your confidence in this to your employees and colleagues, even though it is difficult to predict when things will pick up.

Prices of most commodities — other than gold — while lower than a year ago, are quite high by historical standards, although production costs have risen substantially. The fundamentals for a continuing strong demand for mined products are still in place due to the growth of developing economies. Because exploration will suffer heavily, the world may find itself even further behind in its resource requirements and an even bigger boom may result.

It takes time to develop new products and services. The initial stages of marketing also take time before an initial sale, particularly if the development is a quantum jump from previous technology. Now is the time to be innovative. Time and people are becoming more available. If money is lacking, search out partnerships. Investigate federal and provincial programs that assist with R&D. Be ready with new offerings when markets pick up.

Mining companies are cost-conscious, even in the best of times. In good times, it is the only way they can make more money. Now, it is essential to keep costs low in order to keep mines open. Thus, any new ways that you can invent to save time and money in extracting or processing will give you a competitive advantage.

When faced with shrinking revenues, some managers find it wise to reduce their marketing efforts. Others know that stopping marketing is like not paying your electricity bill — eventually the lights will go out. Develop strategies that will ensure that you retain your key clients. Ensure that your presence in the marketplace is maintained through advertising at trade shows, in print and on the web.

Marketing need not be expensive if it is well planned and executed. If you have time, you should consider attending more business events and making cold calls on new potential clients. Another idea is to use extra time to prepare that technical paper to publish or present at the next convention. A slow period is the time to improve your selling punch. When was the last time you or your employees took a sales course to sharpen your skills? What about your network of sales agents or distributors? You could motivate them by running a meeting at your plant where they could learn more about you and your products or services, to help them sell better.

The world is a big place. There are opportunities in places that you may not have thought of. Do some research. Investigate foreign markets. Ensure that you are aware of all the services that governments offer to help exporters, and that you use those services that will help your business.

The current spate of mine closures, mothballing of development projects and slashing of exploration spending will not have hit all supply firms equally, because many are working against backlogs. However, do not ignore the fact that the low part of the mining cycle is upon us. The earlier that you realize that the approaches that you have been using in the past few years of expanding markets will probably not serve you well in the next year or two, the better. Prepare now for tough times, followed by a recovery.

Jon Baird
Jon Baird, managing director of CAMESE and the immediate past president of PDAC, is interested in collective approaches to enhancing the Canadian brand in the world of mining.

Post a comment


PDF Version